As is known, amendments to the Civil Code of the Russian Federation came into force, referring to the provisions on pledge, assignment of the right of claim and transfer of debt. Today, these amendments do not need additional announcements and research; after six months, the judicial practice has fulfilled this task in full and the law enforcer can safely rely on the derived laws.
Along with the existing position of civil legislation – the protection of the interests of the mortgagee, the practice opens up real possibilities for the lawful and unfair “release” of property from the pledge. Of course, the transfer of property as a method of security does not mean a ban on its full disposal, and the mortgagee himself does not impose any restrictions, and the subject of the pledge, in principle, can be realized by the mortgagor.
However, the eternal question of the protection of their own property rights, the issue of cost optimization forces the pledgor to maneuver between the norms of the right of pledge.
In situations involving the foreclosure of collateral, both the mortgagor and the mortgagee would be helpful to draw attention to the following examples of judicial practice.
If there are circumstances that impede the execution of a judicial act
The Arbitration Procedure Code of the Russian Federation has established the possibility of postponing or deferring the execution of a court decision, changing the method and procedure for its execution. The subject of the pledge at the time of the enforcement proceedings may be released if the evidence is presented by the pledger that testifies that the debenture has been repaid in a different way.
An example from practice. The defendant (debtor, mortgagor) appealed to the court to change the method and order of enforcement of the judgment, stating that the court decision in the present case as of 10/10/2014 was not executed in the part of 131,496 rubles, which is disproportionate to the value of the collateral the court imposed a penalty (the security value of the property amounted to 11,488,800 rubles).
The court refused to satisfy the application for changing the method and the order of execution of the decision, arguing as follows. Changing the method and procedure for enforcing the decision in part of the foreclosure of the mortgaged property owned by the defendant may significantly impede the execution of the court’s decision or make it impossible in the event of a release of this property from the burden and further possible implementation by the debtor.
Evidence of the possibility of repayment of the remaining debt by a court decision the defendant is not represented. The applicant made a mistake without presenting evidence indicating the possibility of repaying the debt by other means and did not use these arguments until the case was decided (definition of the Arbitration Court of the Rostov Region of December 18, 2014, No. А53-23327 / 13).
In case of foreclosure of the mortgaged property
The respondent-mortgagor has the right to prove the circumstances confirming the insignificance of the violation and disproportionality of the requirements of the mortgagee to the value of the mortgaged property.
The amount of the pledgee’s claims is assumed to be disproportionate in the case when the amount of the unfulfilled obligation is less than five percent of the market value of the pledged item proven by the pledger. As a rule, therefore, the claims of disproportionality of the claims of the pledgers remain without consideration, except in some cases.
An example from practice: the Company filed a lawsuit in the court, one of the requirements of which was the collection of funds transferred by the claimant to secure obligations under the state contract. By the court’s decision, these requirements were fully satisfied.
Disagreeing with the findings of the court of the first instance, the defendant filed an appeal, in support of which he indicated that the court did not give a proper assessment of the contract and the condition contained in it to return the security deposit. The court of appeal determined that there were no grounds for quashing or changing the court’s decision, stating the following.
A state contract for the supply of goods was concluded between the parties, and funds were transferred to the claimant as a way of securing the claimant. Due to the failure by the Company (the claimant) to fulfill its obligations, the contract was terminated, a penalty was recovered from the Company, the amount of the pledge was not returned to the respondent on a voluntary basis.
The court concluded that the court did not establish the grounds for foreclosure of the penalty for the money transferred to the security, and the amount of the withholding security was clearly disproportionate to the defendant’s (penalty) claim.
The court’s release of the defendant from the obligation to return the amount of the pledge in connection with the termination of the contract would mean the defendant’s unjust enrichment, which is unacceptable, and also indicated that the plaintiff applied double responsibility for the violation of the same obligation for the same period (Resolution Ninth Arbitration Court of Appeal on 03/12/2015 in case number A40-141966 / 14).
In situations where the value of the mortgaged property significantly exceeds the amount of debt obligations, and the defendant has objections to the repossession of all the property, the court may conclude that the claimant’s claims are satisfied by repossessing the part of the mortgaged property.
At the same time, the mortgagor must prove that the funds received from the sale of part of the mortgaged property will be sufficient to fully meet the requirements of the mortgagee, as well as provide documents confirming the market value of certain movable or immovable things that the mortgagor is invited to repossess (Resolution of the Supreme Arbitration Court dated February 17, 2002 No. 10 “On some issues of the application of pledge legislation”).
An example from practice: the Bank appealed to the Company with a claim to foreclose on the subject of the pledge – three capital construction objects and a land plot, and the establishment of the initial sale price of the disputed property. Having studied the materials of the case, the court concluded that the claim was satisfied only in part on the following grounds: the total collateral value of the property, according to the contract, was 5,173,500 rubles; in accordance with the assessment report presented in the case file, the market value of the collateral was 25,150,000 rubles.
Thus, the market value of pledged items in the aggregate significantly exceeds the amount of the Bank’s claims, while the recovery is made at the expense of the pledged property within the limits of the amount of the debt. Under such circumstances, the plaintiff’s claims may be satisfied by foreclosing a part of immovable property with a collateral value equal to the debt (decision of the Arbitration Court of the Republic of Tyva, March 17, 2015 No. А69-3652 / 2013.
The arguments about the disproportion of the pledgee’s requirements in bankruptcy cases deserve special attention. In this situation, the property is of particular value to the remaining competitive creditors, the secured creditor has a number of advantages and, in fact, is opposed to the other creditors. Therefore, everyone is interested in releasing a part of the property from the pledge and including it in the main bankruptcy estate, except for the pledgee.
The fair acquisition of pledged property, from the day the amendments to the provisions of the Civil Code on pledge, on the assignment of claims and on the transfer of debt, became an independent basis for termination of pledge, by virtue of a direct indication of paragraphs. 2 p. 1 Art. 352 of the Civil Code.
The Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation of February 17, 2011 No. 10 “On some issues of the application of pledge legislation” more precisely outlines this position, indicating the following. The pledged movable property paid for from the mortgagor by a person who did not know and should not have known that the property acquired by him is a subject of pledge, cannot be levied.
In this case, the courts must assess the circumstances of the acquisition of the mortgaged property, on the basis of which the buyer should have assumed that he is acquiring the property that is in the pledge. In particular, the courts must establish whether the original copy of the document certifying the seller’s right to sell the property (for example, a vehicle passport), or its duplicate, was served on the purchaser; were there any signs of pledge on the mortgaged property at the time of its transfer to the acquirer?
These innovations are reflected in the already established judicial practice
In accordance with paragraph 1 of Art. 3 of the Federal Law of 21.12.2013 No. 367-FZ “On Amendments to Part One of the Civil Code of the Russian Federation and declaring certain legislative acts (provisions of legislative acts) of the Russian Federation” invalid, the provisions regarding a bona fide acquirer apply to legal relations arising after the day the entry into force of this Federal Law, that is, from 01.07.2014.
In one of the definitions, the Novosibirsk Regional Court stated the following: “The pledge obligation arose before July 01, 2014, while it was lasting and persisted both before and after the specified date. As for the legal relations connected with the acquisition of the pledged property by the bona fide purchaser, they arose on the day of the acquisition of the disputed property, that is, after the day of the entry into force of the aforementioned Federal Law, and therefore, the provisions of paragraphs. 2 p. 1 Art. 352 of the Civil Code of the Russian Federation, in connection with which the pledge was terminated at the time of the property purchase ”(Appeal definition of the Novosibirsk Regional Court of 02.26.2015 in case No. 33-1481 / 2015).
But the appellant’s reference to the bona fide acquisition of property in another appeal determination was rejected by the court, due to the fact that the purchase of the disputed property was made before the amendments to Art. 352 of the Civil Code of the Russian Federation (Appeal definition of the Rostov Regional Court of February 10, 2015 in case No. 33-1566 / 2015).
The liquidation or bankruptcy of a legal entity that is a debtor on the main obligation entails the termination of the additional obligation, the pledge, of both the mortgagor and the person acquiring the said property.
Example from practice: The Company applied to the arbitration court with a claim to the bank to terminate the mortgage in respect of a separate non-residential building. The court found the claims to be satisfied for the following reasons. It was established that the Company acquired the building burdened with a pledge from the organization, which was later liquidated, said liquidation is confirmed by the case materials.
In this connection, in accordance with Art. 408 of the Civil Code of the Russian Federation, the obligations of the debtor – the organization being liquidated are terminated. The pledge is additional in relation to the main obligation; any termination of the main one entails the termination of the additional obligation.
According to paragraph 1 of Art. 352 of the Civil Code of the Russian Federation, one of the grounds for termination of a pledge is the termination of the obligation secured by the pledge. By paragraph 1 of Art. 419 of the Civil Code of the Russian Federation, the obligation is terminated by liquidation of the legal entity. Due to the fact that the organization of the pledger – the debtor was liquidated, its obligations to creditors were recognized as repaid, the claimant had the right to termination burdens in the form of a mortgage on the above real estate.
The presence of the previous pledge, confirmed by the materials of the case, is not a ground for refusing to satisfy the claim for the repossession of the pledged property on the pledged property. It would seem that such a conclusion of the court contradicts the provision of Art. 342 of the Civil Code of the Russian Federation with regard to the fact that the claims of the subsequent mortgagee are satisfied from the value of this property after the claims of the previous mortgagees, but in some cases this judgment finds itself justified.
So, for example, the court satisfied the requirements of the subsequent mortgagee – the bank to foreclose on the subject of pledge and did not take into account the objections of the third party – the previous mortgagee, arguing that: “The fact that the defendant entered into a pledge agreement and concluding a subsequent pledge agreement without the consent of the original pledgee does not entail the invalidity of the agreement since art. 342 of the Civil Code established other legal consequences of such a violation.
Under such circumstances, the fact of concluding a pledge agreement is not a ground for refusing a claim. ” At the same time, this decision does not deprive a third person of the right to bring an action to the defendant in accordance with the law to recover the debt under a loan agreement and foreclosure of the mortgaged property.
In this situation, the third party apparently made a mistake in not making an independent claim on the subject of the pledge, but merely objected to meeting the requirements of the subsequent pledge holder (Decision of the Dyurtyulinsky District Court of the Republic of Bashkortostan dated March 4, 2015 on case No. 2 43/2015).
In the case of the appeal of the previous pledgee to the court after the satisfaction of the requirements of the subsequent pledgee, the requirements of the former shall also be subject to satisfaction. The court has the right to determine the preferential right to recover the said person, based on the direct instructions of Section 1, Art. 342 and art. 342.1 of the Civil Code on the determination of the moment of the pledge occurrence.
When considering cases involving the foreclosure of bail, it is important to establish the existence of subsequent mortgagees, since the decision taken may affect the rights and obligations of the person who is not involved in the case.
Example from practice: the Judicial Collegium considers the arguments of the appeal of the Bank, which was not involved in the case of violation of its rights unfounded. The conclusion of a pledge agreement without the consent of the previous pledgee does not entail the invalidity of such a contract. The question of the further implementation of the car is regulated by the law “On Enforcement Proceedings”.
Upon receipt of several writs of execution, the bailiff determines which pledge was initial, and collects and transfers the money to the original pledgee. Also, the provisions of Art. 342, 342.1 of the Civil Code of the Russian Federation regulates the ratio of the preceding and subsequent pledges, as well as the sequence of satisfying the requirements of the pledge holders. So, the absentee decision does not affect the rights and legitimate interests of the complainant (Appeal definition of the Penza Regional Court of 02.12.2014 in case No. 33-2878).
t is worth noting that in order to avoid unnecessary losses, the mortgagor should pay attention to the disproportionality of the recovery of the value of the mortgaged property and the possibility of satisfying the requirements of the mortgagee in part. Also considered examples of cases once again make it clear that there are many unscrupulous ways to release property from bail: entering into a fictitious previous pledge agreement, selling the property to a bona fide acquirer, liquidating the company and conducting bankruptcy procedures.